The Economic Survey presented to Parliament today says that the economy has bounced back from the global economic slowdown and is on its way to the growth path of 9 per cent. The CSO estimate of 7.2 per cent GDP growth for 2009-10 reflects the fast paced recovery given the Index of Industrial Production (IIP) posting a record 16.8 per cent year-on-year growth during the month of December 2009. The Survey says that the economy has responded well to the policy measures undertaken in the wake of global financial crisis. It says, the adverse impact due to the delayed and sub-normal monsoon has been contained to a large extent and a better than average rabi agricultural season is expected. The Survey says that the recovery is well founded with pick up in merchandise exports, capital flows and non-bank food credit.
The turnaround came in the second quarter of 2009-10 when the economy grew by 7.9 per cent, year-on-year basis. The CSO estimates forecast 7.2 per cent growth in GDP with industrial output growing at 8.2 per cent and service sector at 8.7 per cent. The recovery is particularly impressive despite a decline of 0.2 per cent in agriculture output primarily due to sub-normal monsoon. The Survey says, the broad based nature of the recovery creates scope for a gradual roll back, in due course, of some of the measures undertaken over the last 15 to 18 months to put the economy back on the growth path of 9 per cent.
The Survey expresses concern over the emergence of high double-digit food inflation especially in the second half. Food price inflation stood at 17.9 percent for the week ended January 30, 2010 while the inflation in fuel, power, light and lubricant at 10.4 per cent. It says that the significant part of this inflation can be explained by supply side bottlenecks in some essential commodities. Since December 2009, there have been signs of these high food prices, together with hardening of non-administered fuel prices, getting transmitted to other non-food items. This has created some concerns for higher than anticipated generalized inflation over the next few months. The recovery in GDP growth as indicated in the CSO advance estimates is broad- based with 7 out of 8 sectors/sub-sectors showing a growth rate of 6.5 per cent or higher. The per capita growth in income has recovered to 5.3 per cent in 2009-10 from 3.7 per cent in the previous year. The per capita consumption growth as reflected in the private final consumption expenditure shows a declining trend since 2007-08.
The Survey says that the country received 23 per cent less rainfall during the south-west monsoon 2009 but some of the shortfall was made up during the post monsoon season when the country received 8 per cent excess rainfall. Kharif 2009-10 season showed a decline of nearly 6.5 per cent in acreage with the entire decline confined to rice crop. While the decline in Kharif acreage under pulses was 5.63 per cent, some of this decline has been made up in the rabi season. As per the available estimates, wheat, pulses and groundnut have seen an increase in acreage as compared to last year.
The growth of broad money (M3) has moderated from around 21 per cent in the beginning of fiscal year to 16.5 per cent by mid January 2010 and it has remained below the indicated growth projection. While in the first half of the year, credit to the Government remained the key driver of money growth, it has moderated since the third quarter of 2009-10. The Survey says that since the outbreak of the global financial crisis in 2008, the RBI has followed an accommodative monetary policy supporting early recovery of the growth momentum. This has also facilitated the unprecedented borrowing requirement of the Government to fund its fiscal deficit. Nearly two third of the borrowing of the Government was completed in the first half of the fiscal year which not only helped in checking pressure on interest rate but also created space for the revival of private investment demand in the second half of the year. The fiscal expansion undertaken by the central government as a part of the policy response to counter the impact of global slowdown has resulted in increased fiscal deficit from 2.6 per cent in 2007-08 to 6.5 per cent in the Budget Estimates for 2009-10.
The Survey says that the recommendations of the Thirteen Finance Commission have to be taken on board in shaping the fiscal policy for 2010-11 and in the medium term. The Finance Commission has recommended a calibrated exit strategy from the expansionary fiscal stance of 2008-09 and 2009-10. It has also suggested that the revenue deficit of the centre needs to be progressively reduced and eliminated followed by emergence of revenue surplus by 2014-15.
The Survey notes with satisfaction that several factors that have emerged from the performance of the economy in the last 12 months augur well for the Indian economy. The gross domestic savings as a percentage of GDP stands at 32.5 per cent in 2008-09 while the gross domestic capital formation stands at 34.9 per cent. These figures compare favourably with some of the fastest growing economies. It also underlines the significance of the presence of Indian corporations in the global market place. The Survey is hopeful that the economy will go back to 9 per cent growth rate in the medium term. This follows the revival in investment and private consumption demand impressive growth in exports in November and December and remarkable turn around in Core infrastructure sector. It says, after a set back agriculture is gradually getting back to the projected path and with a reasonable one per cent additional growth in GDP coupled with recovery of global economy, the Indian GDP can be expected to grow around 8.5 per cent +/-0.25 per cent. With full recovery the economy can breach the 9 per cent mark in 2011-12. Given the steadily improving fundamentals of the economy, the Survey says, if there are improvements in infrastructure, both urban and rural, and reform in governance and administration, it is possible for India to move into double-digit growth and even become the fastest growing economy in the world within next four years.

Budget expected to cut deficit; borrowing a worry New Delhi, Reuters: India's annual budget on Friday is expected to slash the deficit as the economy rebounds, but investors were hoping Finance Minister Pranab Mukherjee will also be firm on keeping borrowing in check.
Economists polled by Reuters forecast Asia's third-largest economy would cut its fiscal deficit to 5.6 percent of GDP in the year starting April 1, from a target of 6.8 percent in the current year, a 16-year high. Government borrowing was forecast to rise by another 2.2 percent to 4.61 trillion rupees ($99.5 billion), according to the Reuters poll.
Indian federal bond yields rose late on Thursday after Planning Commission Deputy Chairman Montek Singh Ahluwalia said that strong growth in 2010/11 could absorb higher borrowing, raising concerns that the government may be looking to tap markets for more than had been expected.
Calls for fiscal discipline have gained urgency as inflation is forecast by some economists to reach 10 percent in coming weeks as high food prices fuel broader inflation expectations.
Finance Minister Mukherjee was expected to count on surging economic growth, which his ministry forecasts will grow by 8.5 percent in the next fiscal year, as well as higher revenues from sales of government company stakes and 3G mobile licences to forestall the need for spending cuts.
The government growth target for next year exceeds the 8 percent forecast in a Reuters poll of economists in late January.
Mukherjee, scheduled to begin speaking at 11 a.m. (0530 GMT), was expected to unveil gradual measures to roll back fiscal stimulus measures that were implemented to ease the pain of the global downturn, including tax breaks to several sectors.
He may also unveil plans to address shortfalls in food production and distribution that have been a key driver of inflation, as well as initiatives to address India's chronic infrastructure deficit.

NEW DELHI: Finance minister Pranab Mukherjee on Friday began the presentation of Union Budget 2010-2011 with a renewed sense of optimism over the country's growth and clear signals from policymakers to bring deficits back to manageable levels.

Expectations are high from the 74-year-old veteran politician, who has tabled four budgets in the past, that he will address the twin issue of bringing down prices while ensuring higher overall growth for the economy.

At the same time, he is also under pressure to roll back, albeit gradually, the $37-billion stimuli announced since December 2008 to help India weather the global economic slowdown.

The Economic Survey 2009-10 presented on Thursday favoured the gradual rollback of stimulus measures that were introduced following the global economic meltdown in late 2008. However on the eve of the Union Budget, Mukherjee talked about the measures that would be taken by the government to deal with 17.85 percent food inflation and certain aspects of the economy.

On the Budget day, when the Finance Minister reads through reams of paper, the common man is often left confused. Worse still, there are a whole lot of numbers and jargons like capital account expenditure and current account deficit that could baffle many.
But hidden within those papers are numbers that impact your wallet directly. For example, in the last Budget the Finance Minister (FM) abolished the Fringe Benefit Tax that the employer paid for providing benefits to employees.
These benefits included company car or house and payment of tuition fees of employees' children by the employer. This financial year onwards, employees will have to bear the tax burden that the government levies on such perquisites.

And there are several similar measures that impact the common man directly. Here are few sections you should look for without actually going through the entire Budget document.Rates of income tax: This section gives the basic exemption limits and rates of taxation beyond a certain limit. If the basic limit is enhanced, it would mean more money at the hands of the individual. For instance, last July FM hiked the basic limit for individuals from Rs 1.5 to Rs 1.6 lakh. For women and senior citizens, the new limit is Rs 1.9 lakh and Rs 2.4 lakh, respectively.Budget wish-list? | Union Budget: Sectors wish list | Railway Budget 2010Section 80C: This section includes instruments where an individual can invest to save tax. In addition, there are certain expenses such as, school or college fees for children that are included under this section. The current limit is Rs 1 lakh. Besides investment in the Employee Provident Fund and principal of home loan, there are a large number of instruments like post office saving schemes and equity linked savings schemes where one can invest to claim the deductions.Section 80D: Under this section, a person can claim deduction for paying health insurance premium. The general deduction available to each taxpayer is Rs 15,000, for self, spouse and children combined. A person can claim Rs 15,000 additional deduction in case he pays for his or her parents' policy. If the amount is paid for a senior citizen, then one can claim an exemption of Rs 20,000.Pranab speaks on Budget eveSection 24: This deals with the interest paid on a housing loan. Under this section of the Income Tax Act, interest paid up to Rs 1.5 lakh a year on a home loan can be set-off from salary or business income, for a self-occupied property.Section 80E: Under this section, one gets tax benefits on repayment of loan taken for higher studies or post graduation courses like engineering, medicine, management and others. The existing benefit is Rs 25,000.Pranab's daughter comes out with Budget wishlist
There are other lesser-known sections, where a person can claim additional deduction from his income. These include money spent for maintenance of handicapped dependants (Section 80DD); money spent for medical treatment of self and dependants (80 DDB) and amount paid for charity (Section 80G).
If you miss the Finance Minister's speech, you can get a copy in newspapers as well as on the ministry's website. The website elaborates all the amendments to the existing tax structure.

NEW DELHI: Finance minister Pranab Mukherjee on Friday began the presentation of Union Budget 2010-2011 with a renewed sense of optimism over the country's growth and clear signals from policymakers to bring deficits back to manageable levels.

Beginning his speech, the finance minister said the Indian economy had weathered the crisis well but the main challenge was to make growth inclusive. The focus is to get a double-digit GDP growth rate, he said. Social sector reforms will also be on the agenda, Mukherjee said.

Economic growth in 2009-10 may turn out to be higher than 7.2%, the finance minister said. We hope to breach the 10% mark in not too distant future, he added. He said the need was to make growth more broad-based.

Pranab Mukherjee said Rs 400 crore to be earned from green revolution in Bihar, Jharkhand, West Bengal and Orissa, and Rs 300 crore for creating 6000 pulse and oilseed villages.

Pranab Mukherjee said listing of PSUs will improve corporate governance. He added there would be a new system for direct transfer of subsidies to farmers. Goods and Services Tax (GST) along with Direct Taxes Code (DTC) to be implemented from April, the finance minister said.

Expectations are high from the 74-year-old veteran politician, who has tabled four budgets in the past, that he will address the twin issue of bringing down prices while ensuring higher overall growth for the economy.

At the same time, he is also under pressure to roll back, albeit gradually, the $37-billion stimuli announced since December 2008 to help India weather the global economic slowdown.

The Economic Survey 2009-10 presented on Thursday favoured the gradual rollback of stimulus measures that were introduced following the global economic meltdown in late 2008. However on the eve of the Union Budget, Mukherjee talked about the measures that would be taken by the government to deal with 17.85 percent food inflation and certain aspects of the economy.